1. Field of the Present Invention
The present invention relates generally to systems and methods for selling used goods through internet auction sites, and more particularly to a reverse logistics method for recapturing value of used goods over one or more internet exchange portals.
2. Discussion of Background Art
Ever since the industrial revolution, rapid technological advancements have created a need for corporations, schools, universities, and governments to constantly upgrade their technology infrastructure to remain competitive. Suppliers often identify such customers as “strategic-account customers” which refers to large customer segments whose need is to constantly remain on the forefront of technology in order to remain competitive. In the United States, many strategic-account customers repurchase their personal computer infrastructure as often as every year to remain competitive, because rapid technological advancements result in obsolescence of the previous computer infrastructure purchases.
For example, FIG. 1 is a pictorial diagram of a traditional model 100 for a “vertical distribution supply chain” of capital asset flow used in the 1980s and early 1990's. Traditional high technology computer manufacturers 102 sold capital equipment to strategic-account customers 104 through a series of intermediaries, known as dealers and distributors 106. After the equipment was no longer useful to a strategic-account customer, the equipment was either sold to a secondary dealer/distributor 108 at a substantial loss or left for scrap 110 resulting in a potentially large disposal cost.
During this era, computer manufacturers opted for the dealer/distributor mechanism for two major reasons. The first reason was the “hi-touch” requirement of selling personal computers. Because personal computers were new consumer products, high technology computer manufacturers needed dealer/distributor networks to assume the role of building product awareness, customer bases, and opening retail stores, so that manufacturers could focus on creating new and innovative products, and not have to worry about building product awareness, customer bases, or opening retail stores around the world.
The second reason for the dealer/distributor mechanism involved warranty and service. High technology computer manufacturers felt that cost savings could be realized by having warranty and service handled by dealers/distributors who were in direct contact with the customer. Additionally, dealer/distributor storefront operators provided manufactures greater visibility and brand recognition of their product to customers. Therefore dealer/distributor networks acted as agents for administering warranty and service for high technology computer manufacturers without building of internal service departments within high technology companies.
While high technology computer manufacturers selling and manufacturing new wares generally do not deal in older obsolete computers, they were beginning to realize that a build up of these old products was destabilizing their companies, tying up cash flow, and confusing their distribution channels. The strategic-account customers were similarly faced with huge burdens of accounting for previously purchased, but now obsolete, computer infrastructures.
Computer dealers, who oftentimes were family owned businesses begun by enterprising entrepreneurs who sought to maximize revenue from each sale, found it difficult to make money selling solely based on price, because of the intense competition in the dealer/distribution channel. For this reason, many computer dealers began seeing huge revenue opportunities in secondary market related service transactions.
For example, as strategic-account customers decided they needed to repurchase new computer infrastructure yearly, computer dealers found that they could repurchase existing computer infrastructure, often times sold just a year previous, at steep discounts. For example, if a large beverage manufacturer purchased $2,000,000 of computer infrastructure in year 1991 from a computer dealer, it was not unusual to see just a year later, in 1992, the market value of that purchase drop to $1,200,000 as a complete unit because of rapid technological advancement. Because most strategic-account customers are in the business of providing goods and services unrelated to computers and lack domain expertise of the computer industry, strategic-account customers often perceive the current market value of the computer infrastructure purchased in 1991, the beverage manufacturer's perception is that the market value of the computer infrastructure purchased in year 1991 is virtually nothing. As a result, when a large beverage manufacturer seeks to replace old computer infrastructure purchased a year ago, one of two things usually happened. First, the old purchased inventory was moved to a scrap warehouse, where it would sit until it was later sold off at a general auction along with other excess/discarded equipment, furniture, etc. for pennies on the dollar. For example, the $2,000,000 purchase in 1991 may be sold in a general auction by the beverage manufacturer's auctioneer in 1994 for $1000. This occurred because obsolescence quickly erodes the market price of computer infrastructure and it was typical to see that visible market value of whole computers drop to virtually nothing after three years. Second, the $2,000,000 computer infrastructure purchased by the strategic-account in 1991 was sold to a computer dealer selling new infrastructure in 1992 for $300,000. From the beverage manufacturer's view, the second scenario of recovering $300 K for the 1991 inventory is much more attractive than letting the inventory move to a scrap warehouse, where the recovery value was minimal.
However, due to the computer dealer's domain expertise, the computer dealer purchasing the old computer infrastructure for $300,000 could often times rapidly sell the $300,000 purchase of 1991 inventory often times for as high as $750,000 on a secondary distributor market. The secondary distributors would again sell the inventory (often times broken in smaller lots or in parts) to smaller secondary dealers and buyers around the world, until the full market value of $1,200,000 was nearly realized. Because of its lack of domain expertise, the beverage manufacturer incurred a substantial loss in terms of lost opportunity cost. The same lost opportunity cost can be seen in several industries.
In addition, computers, printers, and other electronic/mechanical devices are often comprised of parts. These parts are listed on a Bill of Materials, containing all the components making up a computer or electronic device. In order to create supply chain efficiencies, computer engineers and supply chain experts would often times try to use as many “common parts” between older generation hardware and new generation hardware. Therefore the “common parts” in a 1991 computer infrastructure, for example, may have more value in 1992 than the infrastructure as a whole, if segments of its Bill of Materials were sold individually. Such common parts often include, for example, memory, hard drive, monitor, floppy drive, or other components which have been traditionally maintained in a plurality of computer generations. Customers for these common parts may include, for example, computer service centers, parts brokers, small computer manufactures, businesses looking to upgrade their hard drives or memory, and consumers looking to fix their out-of-warranty computers.
Finding these customers in a non-internet world, however, is extremely difficult without tying up cash flow for extended periods of time. For this reason, and because obsolescence affects the market value of computers dramatically, computer dealers often simply sold year old model computers as a whole. Therefore, not only did the beverage manufacturer incur lost opportunity cost, but the computer dealer also effectively incurred a lost opportunity cost in cash flow allocation and timely consummation. This usually occurred because the computer dealer did not have the cash flow stability nor the volume of high technology industry secondary markets parts buyer contacts to know or realize the true market value of the parts within the hardware purchased from the beverage manufacturer. However, in the mid-1990s, manufacturers began reinvented their distribution channels by selling their wares directly to strategic-account customers and bypassing traditional dealer/distributor networks.
FIG. 2 is a pictorial diagram of a current trend 200 in capital asset flow. In the current trend 200, a manufacturer 202 directly sells capital equipment to a strategic-account customer 204. Having a direct relationship with strategic-account and end-user customers yielded huge profitability and supply chain optimization advantages for companies. Manufacturers were better able to schedule production, lower manufacturing costs, and capture more business by selling directly to strategic-account and end-user customers without the added costs of a dealer/distribution network. Traditional high technology computer manufacturers were forced to compete with these companies in order to remain viable; and for this reason, many companies shifted to the direct model. Yet, after the useful life of the equipment, disposal remains a problem and the customer 204 usually sells the equipment for scrap 206.
Thus the current trend has made the losses in asset value recovery even worse when measured from a lost opportunity cost standpoint as done in the 1980's to early-1990's analysis. As the computer manufacturers have moved to a direct model of selling to their strategic-account customers utilizing direct sales mechanisms such as web stores, company owned stores, direct catalogs, many computer dealers have gone out of business. Unable to compete with the manufacturers directly, many computer dealers had to shift their focus to value added software integration providers, known in the industry as “VARs” (Value Added Resellers), and away from selling new products and repurchasing existing preexisting computer infrastructure as they did earlier.
Increasingly, the asset recovery of previously sold computer infrastructure has gone from strategic-account customers directly to scrap warehouses, resulting in massive losses when measured in lost opportunity cost. The problem is further complicated because strategic-account customers may interchangeably replace their computers with a different computer manufacturer. For example, a beverage manufacturer might replace its Compaq computers purchased in 1991 with computers Hewlett Packard in 1992. The latter manufacturer is unlikely to take in another manufacturer's older equipment as it is likely to destabilize and defocus the manufacturer from selling new computers. As a result, not only is there lost asset recovery for the beverage manufacture but its budget for purchasing new computer infrastructure is less than if it were able to quickly recover the true market value of its existing infrastructure.
Even now, high technology commodities vendors have not moved to a direct sales model for strategic-account customers because of the immense problems related to previously sold infrastructure. Ever since the early 1980's to the current day, commodities manufacturers, comprising memory manufacturers, monitor manufacturers and microprocessor manufacturers have sold through dealer channels or through OEM (Original Equipment Manufacturer) relationships with computer manufacturers who use hard drives, memory, and microprocessors as parts when manufacturing computers. Because of the rapid technological advances in memories, hard drives, monitors, and microprocessors, and because of fierce competition, these markets have largely become “commodity” products, which have a very short shelf life before devaluing rapidly. Memory and hard drive manufacturers have suffered significantly due to immense international competition and lower barriers to entry. On the other hand, computer dealers have seen hard drives, monitor, memory, and microprocessor upgrades as a potential money making opportunity. Because strategic-account customers sometimes do not need all new infrastructure, and instead opt for simply a hard drive upgrade or memory upgrade, computer dealers have been able to offer strategic-account customers price points, which memory manufacturers, hard drive manufacturers, and microprocessor manufacturers could not directly match.
The reason for this has to do with “trade ups.” A “trade-up” refers to a dealer's ability to capture and take ownership of existing memory chips and hard drives within a computer, while offering a single price of upgrade to a strategic-account customer. The reason for a trade-up is complex. First, the computer dealer may take ownership of a hard drive made by a variety of manufacturers by offering a “trade-up” service. In this case the computer dealer may offer a separate service for “installation” and “data transfer” and may charge an additional amount per hard drive sold. For this reason, the computer dealer may actually end up recovering a substantial profit for each hard drive. Hard drive manufactures are generally unwilling to balance the cost of the old hard drive, because they do not want to tie up their available cash by taking ownership of old hard drives that they did not manufacture, or destabilize their focus by selling used drives which also hyper-depreciate (such as hard drives, ram, and microprocessors), and also because the used drives may in fact be made by a competing manufacturer. For this reason and as seen in similar industries as the microprocessor, monitor, and memory space, these commodity manufactures have never gone to a direct sales model, and therefore have not been able to optimize their manufacturing costs properly by better gauging customer demand. Moreover, they have not been able to obtain higher profit margins by selling direct.
In response to the concerns discussed above, what is needed is a system and method for selling used goods through internet auction sites that overcomes the problems of the prior art.